Federal Reserve chairman Jerome Powell said Thursday that the US central bank will likely cut its key interest rate slowly and deliberately in the coming months, in part because inflation has shown signs of persistence and the Fed’s officials want to see where it heads next.

Powell, speaking in Dallas, said that inflation is edging closer to the central bank’s 2 per cent target, “but it is not there yet”, according to an Associated Press report.

But at the same time, Powell said the US economy is strong, and the policymakers can take time to monitor the path of inflation.

“The economy is not sending any signals that we need to be in a hurry to lower rates,” the Fed chair is reported to have said. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

Economists expect the Fed to announce another quarter-point rate cut in December, after a quarter-point reduction last week and half-point cut in September.

Still the Fed’s steps after that are much less clear. In September, the central bank’s officials collectively signaled that they envisioned cutting their key rate four times in 2025, the AP reports. But it points out that Wall Street traders now expect just two rate reductions, according to futures pricing tracked by CME FedWatch and quoted by AP. And after Powell’s cautious remarks Thursday, traders estimated the likelihood of a Fed rate cut in December at just below 59 per cent, down from 83 per cent a day earlier.

The Fed’s benchmark interest rate tends to influence borrowing rates across the economy, including for mortgages, auto loans and credit cards. Other factors, though, can also push up longer-term rates, notably expectations for inflation and economic growth.

For example, AP pointed to Donald Trump’s presidential election victory which has sent yields on Treasury securities higher. It is a sign that investors expect faster growth next year as well as potentially larger budget deficits and even higher inflation should Trump impose widespread tariffs and mass deportations of migrants as he has promised.

Yet, in his remarks Thursday, Powell suggested that inflation may remain stuck somewhat above the Fed’s target in the coming months. But he reiterated that inflation should eventually decline further, “albeit on a sometimes bumpy path.”

Powell also explained why he considers the Fed’s role as an independent federal agency to be crucial to its ability to fight inflation. During his first term, Trump threatened to try to fire Powell for not cutting interest rates. And during this year’s election campaign, Trump asserted that as president, he should have a “say” on the Fed’s rate policies.

But the Fed chairman said Thursday that the central bank’s independence from political concerns has made the public confident that the policymakers will keep inflation low over time. That confidence, in turn, has helped reduce inflation after it had spiked in the wake of the pandemic. When consumers and businesses expect inflation to slow, they act in ways that help hold it down — by, for example, not demanding high cost-of-living raises.

“The public believed that we would get inflation down, that we would restore price stability. And that’s ultimately the key to it,” Powell is quoted as saying.

Other Fed officials have also recently expressed uncertainty about how much more they can cut rates, given the economy’s steady growth and the apparent stickiness of inflation.

As measured by the central bank’s preferred inflation gauge, so-called core prices, which exclude volatile food and energy costs, have been stuck in the high 2 per cent range for five months.